Simple Ethics Lesson of Tom Price

So here’s my first question about Tom Price, now former Department of Health and Human Services secretary, sacked on Friday for flitting around the world on private jets at taxpayer expense. How’d he get back home to Atlanta?

Second question. Price racked up more than $1 million in travel costs. When he last week offered to repay only $51,000, the cost of commercial airfare rather than the luxe flights he took—was that at least the economy-plus rate, to travel with a free bag?

Alas, no other questions are necessary about L’affaire de Price as it flies into the sunset of history. For compliance professionals, the lessons here are pretty much self-evident. With the Trump Administration, they usually are.

More than anything else, Price’s misconduct is an object lesson in where compliance policies come from. Someone does something stupid, everyone else recognizes it as stupid, and the ensuing clamor results in a new control. The control applies to everyone, makes the organization less efficient, and leaves employees grumbling.

And all of it could have been avoided if—wait for it—the senior executives had hired people based on strong ethical values in the first place.

Consider the consequence that Price’s misconduct brought about: from here forward, no more Cabinet secretaries using private air travel without advance approval from Trump Administration chief of staff John Kelly. So said a memo issued Sept. 29 from Mick Mulvaney, head of the Office of Management and Budget.

So we had an ethical risk: abusing taxpayer money for air travel. We had a policy to help employees evaluate when their conduct might trigger that risk: Circular A-126. And then we had Price, who spent years in Congress haranguing a certain previous administration about spending, jumping on private flights almost as soon as he moved to HHS.

In other words, his ethics were lacking and he ignored policy. So we had to implement a control: Kelly, one of the most important people in the nation, reviewing all private travel requests before they can proceed.

Ignored Ethics = Expensive Controls

That’s the price of the Trump Administration hiring people who can’t exercise good ethical judgment. We end up forcing one of the few people in the West Wing with good judgment, John Kelly, to spend his time on matters that shouldn’t come to his desk—because Cabinet secretaries should be hired at least partly because of their ability to follow a higher standard of conduct.

The point for compliance officers isn’t difficult to see: the more time you invest in a strong control environment, the less time you’ll need to invest in exhausting control activities. An organization will always reap rewards by scouting for ethical people and supporting them with a corporate culture that supports ethics. In those places, employees will actually like working with coworkers who take ethical behavior seriously, instead of gritting their teeth and doing their jobs in a place that must be a total buzzkill.

I call this the Koslow Principle, after Steve Koslow, currently chief compliance officer at Allianz Life. At a roundtable event years ago, Koslow said: “If I have one hour to worry about ethics or compliance, I’ll worry about ethics every time. Because if I get that right, the compliance stuff gets a lot easier.”

Amen. And when you get the Koslow Principle wrong— as a certain organization in Washington seems to be doing repeatedly— more policies, controls, and procedures are sure to follow. Operational excellence, not so much.